India is reportedly going ahead with its decision to buy five advanced S-400 Triumf missile systems from Russia. Washington has been against such a deal and even threatened India with US financial sanctions.

Why are the S-400 Triumf missile systems important?

Citing government sources, the Times of India reports that a Cabinet Committee on Security chaired by Prime Minister Narendra Modi approved the $5.43 billion (over Rs 39,000 crore) purchase deal on Wednesday. Russian President Vladimir Putin is scheduled to visit India next month. As of now, there has been no confirmation from the government on the purchase of the S-400 Triumf missile systems.

It is believed that the first S-400 squadron will go the Indian Air Force (IAF) within 24 months of signing the contract. The remaining fleet will be delivered in the next four to five years. India will reportedly need to pay 15% of the total amount at the time of contract. The balance will be paid according to the deliveries.

Russia’s S-400 Triumf missile systems are currently the most advanced anti-air system in the world. They can destroy ballistic missiles at a range of 60 km (37 miles). They can also detect, track and destroy enemy bombers, drones, missiles, stealth fighters and spy planes within a range of about 400 km and altitude of 30 km. Russia’s S-400 Triumf missile systems are fitted with least four types of anti-aircraft missiles which serve different purposes.

Top value fund managers are ready for the small cap bear market to be done

During the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More

In recent years, the U.S. has improved its diplomatic and military ties with India. Washington sees New Delhi as an important ally in checking China’s growing regional ambitions. India has also boosted its arms purchase from the U.S. and France. However, it relies heavily on its decades-long partner Russia for hardware and expertise.

China faces US financial sanctions

It is not the first time Russia’s S-400 Triumf missile systems have created global unrest. Last week, China was slapped with US financial sanctions after purchasing the same S-400 systems and also Sukhoi Su-35 fighter jets from Russia. The US financial sanctions are an attempt to isolate Russia after its apparent role in the U.S. elections.

Though Washington has made it clear that they are aimed at Russia, China called the US financial sanctions a “manifestation of hegemony.” China’s Foreign Ministry even warned the U.S., asking it “strongly” to take back the sanctions or “bear the consequences.”

The sanctions against China were made under the Countering America’s Adversaries Through Sanctions Act (CAATSA). China may be the first country to be sanctioned under CAATSA over Russia’s S-400 Triumf missile systems. It must be noted that the state-of-the-art missile system has also created a rift between the U.S. and its NATO ally Turkey.

Turkey also signed a deal with Russia despite repeated threats from Washington. Following the deal, the U.S. even suspended deliveries of U.S.-made F-35 Lightning II fighter jets to Turkey. It is not yet known if Turkey also faces US financial sanctions under CAATSA.

Will India get a waiver?

Like China, India might also be slapped with CAATSA sanctions over the purchase of defense equipment from Russia. However, there have been reports that India, being a key U.S. ally, may receive a waiver. However, when addressing such speculations, Randall Schriver, the Pentagon’s assistant secretary of defense for Asian and Pacific Security Affairs, suggested that India may not get any leverage.

“We would still have very significant concerns if India pursued major new platforms and systems (from Russia). I can’t sit here and tell you that they would be exempt, that we would use that waiver,” Schriver said at the Carnegie Endowment for International Peace in Washington last month.

However, India still hopes to receive a waiver. Both U.S. Defense Secretary Jim Mattis and Secretary of State Mike Pompeo were in India earlier this month for a two-plus-two dialogue. At the time, Pompeo even said that Washington’s intent was “not to penalize great strategic partners like India.”

In addition to the S-400 Triumf missile systems, India’s proposed acquisition also includes four Grigorivich-class stealth frigates, 200 Kamov-226T light helicopters and a lease on a second nuclear submarine. India’s proposed $12 billion acquisition has been in negotiations for the past few years. CAATSA just went into effect in August 2017.

Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

FOLLOW VALUEWALK ON

ABOUT VALUEWALK

ValueWalk.com is a highly regarded, non-partisan site – the website provides unique coverage on hedge funds, large asset managers, and value investing. ValueWalk also contains archives of famous investors, and features many investor resource pages.

The Life and Career of Charlie Munger

You can learn from Charlie Munger firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

Learn from the best and forever change your investing perspective

One incredible tidbit of knowledge after another in the page-turning masterpiece of a book

Discover the secrets to Charlie’s success and how to apply it to your investing